What Does Currency Type Mean on a Credit Card Authorization Form?
Decode the 'currency type' on credit card authorization forms to control your transaction costs effectively.
A credit card authorization form grants a merchant permission to charge a cardholder’s credit card for a transaction. This document is common for recurring payments or when the card is not physically present, such as for online or phone orders. It confirms the cardholder’s agreement and often includes a “currency type” field. This field specifies the monetary unit for the transaction and can significantly influence the final cost.
What “Currency Type” Means
The “currency type” field on a credit card authorization form designates the specific currency in which a transaction will be processed. For example, a transaction might be specified in United States Dollars (USD), Euros (EUR), or British Pounds (GBP). This field is especially relevant in international transactions, where the merchant’s local currency might differ from the cardholder’s home currency. Common currency codes, standardized globally, are used to identify the chosen currency. The field’s purpose is to identify the currency, not to detail the financial implications of conversion.
How Currency Type Affects Your Payment
The selection of a currency type directly impacts the final amount charged to a cardholder, particularly for international transactions. When a transaction occurs in a currency different from the cardholder’s billing currency, foreign exchange rates come into play. These rates determine the value of one currency in relation to another, influencing the converted amount.
One important concept that affects the final cost is Dynamic Currency Conversion (DCC). DCC is a service offered by a merchant, typically when a transaction takes place abroad, allowing the cardholder to complete the purchase in their home currency rather than the local currency. For instance, a U.S. traveler in Europe might be offered the choice to pay in USD instead of EUR. The merchant’s system, often through a third-party provider, performs the currency conversion at the point of sale.
While seeing the charge in a familiar currency might seem convenient, DCC often comes with less favorable exchange rates compared to those offered by the cardholder’s own bank or card network. Merchants and their DCC providers may apply a markup on the exchange rate, which can be substantial, sometimes as much as 18% or an average of 7.6% on top of the transaction amount. This means the cardholder ends up paying more than if their own bank handled the conversion.
Even if DCC is used, some card issuers may still apply their own foreign transaction fees, typically ranging from 1% to 3% of the transaction amount, because the transaction originates internationally. Distinguishing between being charged in the local currency and being charged via DCC is important. If charged in the local currency, the cardholder’s bank or card network (like Visa or Mastercard) performs the conversion using their wholesale exchange rates, which are generally more competitive. If charged in the home currency via DCC, the conversion is handled by the merchant’s provider, often at a less advantageous rate.
Making the Right Choice
When presented with the option to select a currency type on an authorization form, especially during international transactions, making an informed choice can lead to financial savings. A general recommendation for cardholders is to always choose the local currency of the country where the transaction is occurring. For example, if making a purchase in Japan, select Japanese Yen (JPY), or in Canada, choose Canadian Dollars (CAD). This applies whether paying at a physical point of sale or making an online purchase from an international merchant.
Opting for the local currency allows the cardholder’s bank or credit card network to handle the currency conversion. Financial institutions and major card networks typically provide exchange rates that are closer to the interbank rate, which is often more favorable than the rate offered through Dynamic Currency Conversion (DCC). By selecting the local currency, you enable your card issuer to apply their competitive exchange rate, potentially saving you money on the conversion.
Cardholders should carefully review the “currency type” field on the authorization form or the payment terminal before finalizing any transaction. If the form or terminal offers a choice between the local currency and your home currency, this indicates that DCC is being offered. To avoid the less favorable rates associated with DCC, consistently select the local currency option. This practice helps ensure that the conversion is performed by the entity most likely to provide a beneficial exchange rate.
Troubleshooting and Verification
After completing a transaction, particularly an international one, it is prudent to immediately check the receipt or transaction details to confirm the currency used. This verification step helps ensure that the correct currency was processed and that Dynamic Currency Conversion (DCC) was not applied without consent. The receipt should clearly indicate the transaction amount and the currency in which it was charged.
If an incorrect currency was processed, or if DCC was applied despite the cardholder’s preference for local currency, several steps can be taken. The initial action should be to contact the merchant directly to explain the discrepancy and request a correction. Many billing errors can be resolved quickly at this level.
If the merchant is unable or unwilling to rectify the issue, the next step involves contacting the card issuer. Cardholders generally have a limited timeframe, typically around 60 days from the statement date on which the error first appears, to formally dispute a charge with their credit card company. This dispute process, often referred to as a chargeback, allows the cardholder to contest unauthorized or incorrect charges. Providing documentation, such as a copy of the signed authorization form or the receipt showing the currency choice, can support the dispute. Retaining a copy of all signed authorization forms is a sound practice for record-keeping and potential future reference in case of any billing inaccuracies.